Decision on Mideast peace talks due Wednesday

TABA, Egypt (CNN) -- A decision will be made Wednesday regarding the continuation of peace talks after Israeli Prime Minister Ehud Barak recalled his top ministers to Jerusalem for consultations Tuesday.

The move came following the killing of two Israeli civilians in the West Bank.

In a statement released by Barak's office, the Israeli government said it will "lay its hands on the lowly murderers and will punish them with all severity of the law."

Ahmed Qorei, the head of the Palestinian delegation, confirmed that talks with the Israelis had been postponed. He said a decision would be made Wednesday on whether they would continue.

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CNN's Jerrold Kessel reports on the departure of Israeli negotiators after the killing of 2 Israeli civilians

The Palestinian Authority issued a statement denouncing the killings. Added Qorei, "We condemn the killing of all civilians."

Israeli Foreign Minister Shlomo Ben-Ami and Cabinet Secretary
Gilead Sher returned to Jerusalem, the Israelis said, while lower-level members of the Israeli negotiating team remained in Eilat, on the Israeli side of the border.

The Israeli statement said no contacts with the Palestinians would continue at any level as long as the internal government consultations were going on.

Bodies turned over to Israel

Palestinian police sources told CNN that the two Israelis were abducted and killed after entering Tulkarem on the West Bank in the company of an Israeli Arab. The sources said the incident occurred in an area under full Palestinian security control.

The bodies of the two were turned over to Israeli authorities, Israel Radio reported.

Israeli television reported the two were restaurant owners from Tel Aviv, but no further details on their identities or how they were killed were available.

A senior Israeli military official told CNN that the Israel Defense Forces view the killings as further evidence that the Palestinian Authority was doing little to prevent the killing of Israeli civilians.

The killings came after reports of "significant progress" on territorial issues in talks with the Palestinians.

Barak suggests joint administration

As the third day of talks began, sources on both sides told CNN that no one was predicting a breakthrough was close, but there had been "positive developments" on the issue of how much West Bank land Israel would retain in a peace agreement.

No movement was reported on two other key issues: Jerusalem -- including who will have control of the holy sites -- and the right of Palestinian refugees and their descendants to return to lands left in 1948.

In Jerusalem, Barak told Israeli high school students he felt there needed to be joint administration of the holy sites in the Old City to provide access to all religious groups.

He said such a joint administration would not affect Israel's sovereignty over the Western Wall, the Mount of Olives and the City of David.

"In order not to have a split and divided city, and in order to have free access to everyone to the sacred places, we need to respect the right of the believers, and we have to find a way that the practical day-to-day administration of the Old City will be shared administratively," Barak said. "And all that has no connection with our sovereignty. No one will touch and take away our sovereignty over the Western Wall or the Jewish Quarter or on the Mount of Olives."

Have Israelis scaled back demands?

On the West Bank land issue, former U.S. President Bill Clinton had proposed that Israel keep between 4 percent and 6 percent of the West Bank. The Israelis had said they wanted 11 percent.

However, CNN was told Israeli maps presented at the talks had scaled down the 11 percent to 7 percent of the West Bank in the context of a peace deal.

Sources told CNN that if the progress continues, the drafting of an outline agreement might begin.

Barak is trying to strike a deal that could reverse his fortunes in the polls as he heads into the February 6 election.

Polls published in Israel on Tuesday showed that hawkish Israeli Likud leader Ariel Sharon holds a commanding lead of 16 percent to 20 percent over Barak.

Sharon has said if he wins he will not honor any deal negotiated by Barak. However, the Palestinians are said to believe that if a deal is struck, Sharon will have difficulties ignoring it.